The International Revenue Service (IRS) this week made life a little more simple for non-US taxpayers, by announcing that Individual Taxpayer Identification Numbers (ITINs) will expire if they are not be used on an income tax return for five consecutive years.

The new policy applies to any ITIN and will come into action in 2016.

What Are ITINs?
ITINs are only issued to persons who are not eligible to have Social Security Number. They were introduced in 1996 for tax administration purposes, and they allow the collection of taxes from foreign nationals, resident and non-resident aliens and others who have filing or payment obligations under US law.

What is the Current Policy
Currently, only around one quarter of the 21 million ITINs issued since the program launched are being used on tax returns. Under the old policy, announced in November 2012, ITINs issued after 1st January 2013 would automatically expire after five years, even if used regularly, meaning that taxpayers would need to reapply for a new one, starting from 2018.

What is the new ITIN policy?
The new policy will replace the one that went into effect on 1st January 2013, causing the gradual expiration of the millions of unused ITINs, while still allowing any taxpayer who uses their ITIN properly and legitimately to continue to do so.

The new policy means that:

• An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years
• A properly and regularly used ITIN will remain active as long as the taxpayer continues to file US tax returns
• Taxpayers with ITINs issued after 1st January 2013 will no longer face mandatory expirations of their ITINs and will not need to reapply for a new ITIN
• The IRS will not begin deactivating unused ITINs until 2016, to allow taxpayers’ representatives and other stakeholders time to adjust
• Anyone with a valid ITIN, regardless of when it was issued, will still be able to still file a valid return during the upcoming tax-filing season
• For taxpayers whose ITIN have been deactivated, it is possible to file a US tax return using Form W-7

Following this announcement, the IRS stated that it will soon be providing further details on how and when taxpayers with expired ITINs will be notified. We will share this information on this blog as soon as it becomes available.

If you want to understand how this change affects you or if you need help completing a Form W-7 for your US tax return, please contact us?